OREANDA-NEWS. July 1, 2009. State Oil Company of Azerbaijan Republic (SOCAR) is ongoing two-stage reconstruction of Garadagh underground gas storage (UGS) to increase its capacity.

SOCAR reports that to order of the Company’s Department of Gas Operations the Geophysics & Geology Department has conducted a 3D survey and made a UGS individual geological model to assess a possibility of its capacity growth. Such a possibility was confirmed.

Currently a large-capacity gas compressor plant consisting of five compressor units allowing pumping 7 million cu m per day under pressure of up to 160 Bars is under installation at the UGS.

“Simultaneously geological surveys in Nakhchivan Autonomous Republic for assessment of a possibility of construction of UGSs in regions Beyukduz and Givrag are still being conducted. An investigation well will be drilled for the purpose in Beyukduz region,” SOCAR reported.

Equipment for Garadagh UGS is bought in Nizhny Novgorod and has been partly delivered to the country.

Installation of new compressors will allow pumping of more than 2 bn cu m of gas into the storage next year. The first stage cost makes AZN 100 million. The second stage allows increase of storage’s capacity up to 5 billion cu m.

Design estimates for the project are developed by Neftgaztikinti Institute.

The government has charged the Company to reconstruct the gas storage within two years and increase its working capacity from 400-600 million cu m up to 2.3 million cu m of gas.

For 50 years (from 1935 to 1985) the current storage existed as Garadagh gas field from which it was produced 20 bn cu m. Since 1986 it has been operating as UGS.

There are 2 UGSs in Azerbaijan that should be pumped into 1.4 bn cu m in 2008.

Earlier tender for UGS expansion conducted by Azeriqaz CJSC was cancelled. The original cost of the reconstruction project was USD 150-160 million.

The cancelled tender was declared by the project of enlarging of UGS to 2.3 bn cu m, setting of gas-compressing stations and settings for gas purification, leading of capital repair of main foundations.

The project supposed to be realized for 730 calendar days from the day of the contract signing.

Currently the European Bank for Reconstruction & Development has stated readiness to participate in rehabilitation of the Galmaz and Garadagh UGSs within the medium-term strategy on operations in sector of natural resources of Azerbaijan.

Jointly with European Investment Bank (EIB), EBRD is ready to participate in the rehabilitation and capacity increase of the Azerbaijan-Georgia gas pipeline as well as other energy transport initiatives.

There is also potential for gas storage capacity increase to 6.5 bn cu m. Roughly \\$200-400 million is necessary for that purpose depending on mutual capacity target.